iSPIRT – Indian Software Product Industry Round Table is a non-profit think tank formed by leading practitioners of the industry to assist in the cause of building a healthy, globally-competitive and sustainable industry. Visit www.ispirt.in for more details.

India as a Product NationThe Next Google can come from India

June 2014

Simplifying Terminology

SoftwareProductsSoftwareProducts

Telecom Services

Software Services

Restaurants

Auto AncillaryPlant

Telecom Equipment

OnlineContent

Taxi Services

E-commerceStartups

Defense

Aerospace

TechIndustry

AllStartups

TechStartups

Digital Industry

Product StartupsProduct Startups

Software Product Industryis at the intersection of “Tech Startups” and “Product Companies”

Industry ViewEntrepreneurship View

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Important Characteristics of the Software Product Industry

33

SCALABILITY. Cost of production is low and business scales rapidly once the product is

established.

VALUATION. Markets value Product Companies farhigher than others, due to the non-linear

scalability and Intellectual Property

REGENERATING. One successful company spawns many more for service, support, distribution, etc. into a recursive growth

POTENTIAL. Innovation and new product development has endless potential, once

mastered.

Software Product Industry

A brief Introduction to the industry. Establishes the power of the industry and its potential for value creation.

44

What is the Software Product Industry?

55

* The Neti Neti (Not-this, not-this) definition has been traditionally popular in India, in defining a concept as distinct from other known or established ones

Tailor who can make shirts Ready-made shirts makers

SERVICE INDUSTRY PRODUCT INDUSTRY

Software products are not IT Services* IT services companies are like tailors who can either

stitch custom suits or alter a standard design for the client.

Software product companies make readymade suits (mass production). People select the suit they like, try it for fit, and buy it on the spot.

Distinct Business Model

As distinct as the Airlines (people moving service)

and Aircraft (enabling Airlines) industry

66

SERVICE INDUSTRY PRODUCT INDUSTRY

Service Industry is built on other people’s Products

77

TCS

GlobalServices

Company

Infosys

SAPOracle

Microsoft

Customers(India & Aboard)

Global Customers

Impact:

Viability and market success of products

is mainly established by adoption by customers,

particularly in Winner-take-all software product market

Growing Service = Growing Product Adoption =Growing Value Creation.

88

Airtel

Verizon

AppleSamsung

Cisco

IndiaCustomers

USCustomers

Product Flow

Value Flow

Recent Example:

WhatsApp bought by Facebook for $19 Billion

Over $40/user. Had substantial Indian user base.

Same price/user paid to Hotmail by Microsoft in 1997.

99

Trends indicate gradual, global

shift from custom-made

(expensive to build-own) to

mass-customized. Investments

into products is accelerating

world over.

Brand creates value.

Branded Products capture value

1010

Apple prints “Designed by Apple in California” on the back of

every iPod and iPhone it sells, sometimes in a ridiculously tiny

font size

Foxconn the leading manufacturer of Apple* products gets $8 Per iPhone**. Apple, the owner of the design and Intellectual Property has $319 in

operating margin per iPhone.

* http://www.technobuffalo.com/2014/03/28/foxconn-credits-apple-with-13-profit-bump-in-2013/ ** http://www.slate.com/blogs/moneybox/2012/09/25/foxconn_getting_by_on_8_per_iphone.html

Why India needs The Software Products Industry

The Macro-economic argument

1111

1212

Electronics Defense

Software

Communications

The Software Product Industry is the enabling

industry for many sectors

Innovation and Software Products are deeply Linked

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in many ways

The fastest pace of innovation happens in the tech world

The fastest pace of innovation happens in the tech world

Innovation leads to Intellectual Property (patents) and further leads

to product development

Innovation leads to Intellectual Property (patents) and further leads

to product development

Software Products are the quickest way to deploy innovation at scale

Software Products are the quickest way to deploy innovation at scale

Software Product Startups> Entrepreneurship >> Competitiveness

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Most new startups in India are software product startups

Increased consumption of innovative technology at an affordable cost

They solve important problems of small enterprises and consumers

Other industries too becomes globally competitive and attain scale

India takes its place in the world

Product imports are growing faster than Services exports

1515

Growth in Indian

IT Services

Exports to Slow

Down**

Nasscom. 2012

Growth in Indian

IT Services

Exports to Slow

Down**

Nasscom. 2012

India electronics import bill could

surpass oil* - senior advisor

Govt. of India

India electronics import bill could

surpass oil* - senior advisor

Govt. of India

* http://www.reuters.com/article/2011/11/13/india-wef-electronics-idUSL3E7MC08E20111113** By John Ribeiro, IDG News Service. http://www.pcworld.com/article/249598/growth_in_indian_it_services_exports_to_slow_down_says_nasscom.html

Now, the need to play the Product innings

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Natural ResourcesIron-ore, marble, etc. (unfinished)Leather, gems, etc.(semi-finished)

Body shopping (human)

Natural ResourcesIron-ore, marble, etc. (unfinished)Leather, gems, etc.(semi-finished)

Body shopping (human)

Made-in India ServicesTelecom (Airtel)Airlines (Indigo)

SW Services (Infosys)Hospitals (AIIMS)

Made-in India ServicesTelecom (Airtel)Airlines (Indigo)

SW Services (Infosys)Hospitals (AIIMS)

Made-in-India ProductsDefense

AerospaceElectronics

Software Products

Made-in-India ProductsDefense

AerospaceElectronics

Software Products

First innings

Second innings

NOW! Third innings

Need to build Higher-value Export Portfolio

Transforming IndiaOur Software Product Industry is solving India’s hardest problems

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Productivity Gains = Transformative Potential

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Software products offer solutions that can be

deployed in a distributed fashion to millions of

small enterprises and consumers untouched by

technology till today.

Agriculture Healthcare Education

Example. Tally accounting software product has helped nearly a million SMBs gain control on their finances and taxes

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Made in India. Made for India

Software Products for Agriculture

2020

Agriculture

Farmers can embrace new knowledge and information to improve efficiency and speed in the agri supply chain

Education

Software Products for Education

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Creation of innovative test-prep products and state-of-art teaching to bring in learning effectiveness.

Healthcare

Software Products for Healthcare

2222

Software based medical devices and personalized oncology treatment is improving productivity manifold.

SPI will provide innovation blowback to the rest of the world. Not just India for India.

2323

Tremendous untapped

potential to innovate exists in

India

What creates a successful industry?

This section outlines some of the factors that influence creation of a successful software products industry.

2424

Lack of Productization.We are unable to create value out of our successes. Examples.

2525

We conducted the

World’s largest

successful election. Are

we becoming the

“Microsoft” of Polling

machines?

Should we not be a

global leader in identity

implementation, apps

and services with

“Aadhaar”?

Why Indian Products are unable to gain advantage fromlarge domestic opportunities

2626

Can we tilt the balance?Creating level playing field.

2727

Buying Services rather than products leads to inefficiencies

2828

1. Cost of development is far higher than cost of customization.

2. Maintenance and update cost would exceed cost of development.

3. Lost product opportunity.

Main issues:Certificate

A simple survey of

software used by 57 large cities in India for

issue of a “Birth

certificate” shows that almost the every city got

it done on their own.

Certificate

A simple survey of

software used by 57

large cities in India for

issue of a “Birth

certificate” shows that

almost every city got it

done on their own.

Does the Government have a role in developing an Industry?

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Government as a Participant Government as a Catalyst

Many examples are available

where the government has set

the agenda that was fulfilled

by private enterprises

Software Product Markets = Winner-take-all.

3030

Corporatelocal

Subsidiary

DistributionStrategic alliances

CustomersCommunities

Analysts

opinionleaders

significantcontrol

directcontrol

* Branding, euphemistically** Depiction borrowed from Concept Green, LLC. Although the idea is very common.http://www.conceptgreen.net/buzz/blog/hello-world-welcome-to-concept-greens-inaugural-blog

Opinion*

Matters.Startups wielding less

opinion-making power,

lose out to established

players despite good

product

Government Could help.While the Private sector helps itself.

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Industry think tanks and organizations would create buyer awareness for “Made for India” products, Govt. should

create platforms for apps through APIs.

Govt. should promote incubation centers under PPP-model to improve

odds of success for startups.

Pool of Software products of importance

d

d

d

While the Industry promotes entrepreneurship and employment in startups as a good career option, the Govt. should draw focus of the best minds on critical

problems through Challenge Grants.d

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India’s ticket to becoming a Product Nation

Shift from Services to Products is not easy

3232

Why “Product Nation”

3333

Based on the Story of Israel

(called “Startup-Nation”) that

has become a power house of

Technology product startups

that gain global acceptance.

ISRAEL

Second largest in companies doing IPO on NASDAQ

Second highest number of tech acquisitions in the world

ISRAEL

Second largest in companies doing IPO on NASDAQ

Second highest number of tech acquisitions in the world

Software Products Industry can do what the Space Program did in the 90’s

3434

The train has not left the station

and a small nudge for Software

Products will deliver big wins for

the country

The possibilities are astronomical

Indian SPI touches 3m small enterprises today. It will touch 30m enterprises – small businesses, rural schools, primary healthcare centers, small farms, etc. - in 10 years

Creation of 1,00,000 Software Product Companies in India, leading to employment of 3.5 million technical people, and creation of $500+ billion in Market Value in 10 years

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Brand India

3636

Software services branded Indian

talent

Software products will brand Indian

innovation across the world

GREAT ENGINEERS GREAT IDEAS

Gradually change the branding (reflection in the minds of outsiders)

The Two-part Products StoryThe Current Theme

3737

Gradually shift from Current theme

“Made In India” or “India Inside”

Global Brands

Software developedin India

The Two-part Products StoryThe New Theme

3838

We are in the

best position to

understand and

meet the needs

of India

Our innovation

and scale can

serve global

market

demands

To a new theme of

“Made for India” + “Made from India”

Made fro

m In

dia

Made fro

m In

dia

Three fold controls The Software Product Industry could provide

3939

The choice of technologies that

could provide the best outcomes,

chosen through studied approach.

Focus on building

user experiences

that work best

under local

conditions

(e.g. Mobile First

approach).

Products made in

India could address

the current and

pressing needs of

the local market.

2.ConsumerExperience

1.Customer Priorities

3.Technology

Rollout

Enablers of the Transformation

Do we have the right enablers that are needed for the emergence of Indian Software Product Industry in a big way

4040

4 Major Technology Enablers

4141

MobileSmart phone thatcan run applicationand deliver servicesWhen and where you want

CloudPay-as-you-go

inexpensive infrastructure.Scalable as needs grow

APIFlexible, safe andeasy way to combineapplications that useeach other

Open SourceFree to use software

that can be combinedeffectively into apps

and platforms

$

Cloud makes Infrastructure Affordable and Accessible

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CLOUD CLOUD

“Public Cloud”(Lease Rented Apartment)

Infrastructure froma service provider.Pay for use only,

one machine at a time

“Private Cloud”(Self-owned Apartment)

Your owned Infrastructuremade easy to use

All paid upfront. Privacymeans confidentiality

Comes in Two Flavors

Cloud Providers

Any Corporation

Any Government

Build and own your Cloud. Tools available

One device formula User Computing Device = Smart phones with Apps

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India is seeing a surge in Smart phones (one device for

voice and computing needs) and could become the default

user computing device to build “Made for India” apps

Smartphones Are PCs..

...only they're more personal...

...and do nearly everything better...

Headlines from the article on LifeHacker: http://lifehacker.com/5681573/your-smartphone-is-a-better-pc-than-your-pc-ever-was-or-will-be

The Apps Economy: How it works.

4444

SoftwarePlatform

API Management

Key technologies of Cloud (distribution), API (secure, controlled access to platform), App

App Store(Marketplace on Cloud)

Apps(Paid or Free)

Developers End Users

Choose Appsthey need and

install

Sell apps theymake

The World is moving towards API

4545

Data

API* enables independent entities to build software (products) that can link and work together with ease. Integrated applications or products is necessary for

good user experience.

Core BankingApplication with API access

Personal Finance

App

TaxPlanning

App* Application Programming Interface (API) is fast moving to become a business concept than a technical one.

API Technology mature and now available

4646

Many productsand major appsProvide API service

AdvertisingApp

Games

Other well-known API providers

Tripit

TravelGoogle

MapsWalmart

ShoppingWalgreens

Pharmacy

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Free and open-source software now powers every computing need

Open-sourceFree software

$

* The world has realized that Open-source cannot compete on price alone

FreeSource Code

Expertise*Adoption

Innovation+

Certain critical areas of

technology may need National

initiatives to make open

source software usable and

practical

National Initiatives on Open-source Infrastructure: A Chinese Example

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• * People’s Republic of Open Source: China Preps National Linux Distribution

• The reference architecture is being defined by the Ministry of Industry and Information Technology’s The China Software and Integrated Chip Promotions Centre, or CSIP

* Some useful links on the subject: http://www.wired.com/2013/03/ubuntu-china/ Technical Evaluation Report. The Emergence of Open-Source Software in China [http://www.irrodl.org/index.php/irrodl/article/view/331/762]. Open Source in China http://www.slideshare.net/jaaronfarr/open-source-in-china-updated

Affordable Platforms that enable Product Innovation

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$

Cloud Computing

Smart Phones & Apps

API-driven Development

Open-source software

• Reduce capital expenditureon hardware infrastructure

• Subscription pricing affordable

• Designed for building software that integrate with each other

• Easy to build services that get widely adopted

• Smart phones would be thefuture of user computing devise

• Easy to build with small teams

• Reduce capital expenditureon software infrastructure

• Free, but needs work on making effective use

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Thank you